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Crisis Management 1584387393 PDF
Crisis Management 1584387393 PDF
PUBLISHED ON HBR.ORG
FEBRUARY 27, 2020
ARTICLE
CRISIS MANAGEMENT
Lead Your Business
Through the
Coronavirus Crisis
by Martin Reeves, Nikolaus Lang and Philipp Carlsson-
Szlezak
This document is authorized for use only by BRANDON VALLEJO GONZALEZ (bvallejo2@gmail.com). Copying or posting is an infringement of copyright. Please contact
customerservice@harvardbusiness.org or 800-988-0886 for additional copies.
CRISIS MANAGEMENT
ABABIL12/GETTY IMAGES
The Covid-19 crisis has now reached a new critical phase where public health systems need to act
decisively to contain the growth in new epicenters outside China.
Clearly, the main emphasis is and should be on containing and mitigating the disease itself. But the
economic impacts are also significant, and many companies are feeling their way towards
understanding, reacting to, and learning lessons from rapidly unfolding events. Unanticipated twists
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and turns will be revealed with each news cycle, and we will only have a complete picture in
retrospect.
Nevertheless, given the very different degrees of preparedness across companies, the further
potential for disruption, and the value of being better prepared for future crises, it’s worth trying to
extract what we have learned so far. Based on our ongoing analysis and support for our clients
around the world, we have distilled the following 12 lessons for responding to unfolding events,
communicating, and extracting and applying learnings.
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5) Constantly reframe your understanding of what’s happening.
A big-picture synthesis of the situation and a plan to deal with it, once captured on paper, can itself
become a source of inertia. A Chinese proverb reminds us that great generals should issue commands
in the morning and change them in the evening.
But large organizations are rarely so flexible. Managers often resist disseminating plans until they are
completely sure, and then they are reluctant to change them for fear of looking indecisive or
misinformed, or of creating confusion in the organization. A living document, with a time-stamped
“best current view” is essential to learn and adapt in a rapidly changing situation.
6) Beware of bureaucracy.
Controversial, sensitive, or high-profile issues will typically attract review by senior management,
corporate affairs, legal, risk management, and a host of other functions. Each will have suggestions
on how to best craft communications, leading to an overly generalized or conservative perspective
and a slow, cumbersome process.
Assembling a small trusted team and giving them enough leeway to make rapid tactical decisions is
critical. Overly managing communications can be damaging when each day brings significant new
information to light. Use the clock speed of external events as a guideline for pacing the internal
process, rather than starting with the latter as a given.
A living digital document can enhance speed by avoiding the rigamarole of issuing and approving
multiple documents, and also reduces risk, since it can easily be updated or withdrawn as necessary.
Furthermore, distinguishing clearly between facts, hypotheses, and speculations can help in
communicating a fuller and more nuanced picture.
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• Supply-chain stabilization: Attempt to stabilize supply chains by using safety stocks, alternative
sources, and working with suppliers to solve bottlenecks. Where rapid solutions are not possible,
co-develop plans, put in place interim solutions, and communicate plans to all relevant
stakeholders.
• Business tracking and forecasting: It’s likely that the crisis will create unpredictable fluctuations. Put
in place rapid-reporting cycles so that you can understand how your business is being affected,
where mitigation is required, and how quickly operations are recovering. A crisis doesn’t imply
immunity from performance management, and sooner or later markets will judge which
companies managed the challenge most effectively.
• Being part of the broader solution: As a corporate citizen you should support others in your supply
chain, industry, community, and local government. Consider how your business can contribute, be
it in health care, communications, food, or some other domain. Focus on the intersection between
acute social needs and your specific capabilities — in other words, live your purpose.
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• Evolvability: Systems can be built for optimization and peak efficiency or they can be built for
evolvability — constant improvement in the light of new opportunities, problems, or information.
Responses to dynamic crises like Covid-19 put a premium on evolvability. There is no knowable
right answer, and any predetermined answer is likely to be wrong or to become obsolete over time.
But it is possible to iterate and learn towards more effective solutions. While many lessons will be
learned in retrospect, doing something now, seeing what works and remobilizing around the
results is likely to be most effective strategy in the short term.
• Prudence: We cannot predict the course of events or their impacts for Covid-19, but we can envision
plausible downside scenarios and test resilience under these circumstances. We can run scenarios
for a widespread global epidemic, a multi-regional epidemic, and a rapidly contained epidemic, for
example. Now that the focus has shifted from containment of the Covid-19 epidemic in China to
preventing its establishment in new epicenters overseas, we have arrived at another inflection
point, with very high uncertainty. It would be prudent for companies to take a fresh look at worst-
case scenarios and develop contingency strategies against each.
• Embeddedness: Companies are stakeholders in wider industrial, economic, and social systems
which are also under great stress. Those who fail to look at their supply chains or ecosystems
holistically will have limited impact. Solutions that solve for an individual company at the expense
of or neglecting the interests of others will create mistrust and damage the business in the longer
term. Conversely, support to customers, partners, health care, and social systems in a time of
adversity can potentially create lasting goodwill and trust. A key element of dealing with economic
stress is to live one’s values precisely when we are most likely to forget them.
Intellectual preparedness alone is not enough, however. Something can be well understood but
unrehearsed as a capability. Scenarios should therefore ideally be backed up by war gaming to
simulate and learn from behaviors under stress. A war room set-up, with a small dedicated team
empowered to decide and execute, can cut through organizational complexity.
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11) Reflect on what you’ve learned.
Rather than heaving a sigh of relief and returning to normal routines when the crisis subsides, efforts
should be made not to squander a valuable learning opportunity. Even while the crisis is unfolding,
responses and impacts should be documented to be later reviewed and lessons distilled. Rapidly
evolving situations expose existing organizational weaknesses, like an inability to make hard
decisions or an excessive bias towards consensus, which constitute opportunities for improvement.
For example, airline safety is one of the most effective global learning systems we have in this
respect. Each time there is an incident from minor mishaps to tragic accidents resulting in lives lost,
root causes are investigated in forensic detail according to pre-agreed protocols, and binding
recommendations are made. It’s not surprising that flying has become one of safest forms of travel,
thanks to cumulative learnings and adaptations from previous misfortunes.
Martin Reeves is a senior partner and managing director in the San Francisco office of BCG and chairman of the BCG
Henderson Institute, BCG’s think tank on management and strategy. He can be reached at reeves.martin@bcg.com.
Nikolaus Lang is a senior partner and managing director in BCG Germany and global leader of the Global Advantage
Practice. He can be reached at Lang.Nikolaus@bcg.com.
Philipp Carlsson-Szlezak is a partner and managing director in BCG’s New York office and chief economist of BCG. He
can be reached at: Carlsson-Szlezak.Philipp@bcg.com.
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